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20 million students complete the FAFSA every year to apply for financial aid from the federal government, states, and colleges. More than six million federal student loan borrowers are currently enrolled in income-driven repayment (IDR) plans to help keep their payments affordable and avoid default. For years, these students and borrowers have been able to use the IRS Data Retrieval Tool (DRT) to easily transfer their tax information into the online FAFSA and the online application for IDR plans. The DRT was abruptly taken down a month ago due to security concerns, and the Department of Education recently announced that it is expected to be offline until the next FAFSA season begins in October 2017.

The DRT is not just a “convenience” (as the IRS has described it), but the centerpiece of major improvements in simplifying essential financial aid processes. It has greatly increased efficiency and accuracy for consumers, colleges, and loan servicers. And its outage will have profound impacts on millions of students and borrowers who still need to apply for aid, complete verification, and submit IDR forms this year. We urge the Department of Education and IRS to work together to restore secure access to the DRT as soon as possible, and to do so in a way that avoids creating barriers to access for low-income students, such as requiring complicated financial or personal information.

We blogged last week about a number of things the Department of Education should be doing to mitigate the effects of the DRT outage. Meanwhile, as long as the DRT is down, students and borrowers are facing a more complicated, daunting, and time-consuming process to apply for aid and keep their student loan payments affordable. Each additional hurdle makes it less likely that people will get all the way through the process and be able to meet crucial deadlines.

How many students and borrowers will be affected by the DRT outage between now and October?

More than 8 million students (40% of all aid applicants) applied for aid between April 1 and September 30 in recent years. Many of these applicants used the DRT, and a greater share were expected to use it in 2017-18 due to recent improvements to the FAFSA timeline.

3.4 million federal student loan borrowers applied for IDR or updated their income information electronically and had access to the DRT in the most recent year.*

How will students and borrowers be affected by the DRT outage?

For the FAFSA:

Instead of using the DRT to quickly transfer their tax information and pre-populate the answers to up to 20 high-stakes questions, students will have to get a copy of their 2015 tax return and manually input their data into the FAFSA (both the 2016-17 and 2017-18 FAFSAs require 2015 tax data). If they don’t have a tax return on hand, they can try to retrieve information from their tax software or tax preparer if they used one, or request a tax transcript from the IRS, but getting an official tax transcript can take up to 10 days by mail. It is possible but more difficult to quickly get an electronic transcript: you first need to have a mobile phone under your own name plus a personal credit card, mortgage, home equity loan, or car loan – hurdles that make that process inaccessible for many, particularly low-income families.

After submitting the FAFSA, students who don’t use the DRT may be more likely to be selected for an additional process called “verification” and required to get an official tax transcript to confirm their FAFSA information before they can receive their aid. For example, Purdue University reported that the share of aid applications flagged for verification doubled from 10% to 20% after the DRT was taken offline. The Department of Education has touted the DRT as “the fastest, easiest, and most secure method of meeting verification requirements.” Without it, students have to request official tax transcripts, with the hurdles discussed above. We, along with a bipartisan group of 43 lawmakers and national associations of financial aid professionals, college admissions counselors, and college access professionals have asked the Department to also accept signed tax returns while the DRT is not available.

The additional delays in getting the necessary documentation to apply for aid or complete verification will affect whether students receive their financial aid in time to enroll in college. Many states and colleges require the FAFSA for their own aid programs, many of which are first-come, first-served. For example, a Buzzfeed article reports that Texas state grants for needy students have already run out for this year, so students backlogged in verification are losing out on $5,000 of grant money. Additionally, more than half of financial aid administrators surveyed said that verification sometimes, often, or almost always results in students being unable to enroll on time. Without the DRT, the delays caused by verification will be even worse.

For IDR plans:

Borrowers with taxable income cannot complete the process of applying for IDR or updating their income online at StudentLoans.gov, which took an average of just 10 minutes when the DRT was available. The online application will create a PDF that borrowers will need to send into their loan servicer, along with a copy of their most recent tax return. Depending on their servicer, borrowers may be able to upload the required documents onto the servicer’s website or will need to mail or fax everything.

The additional hurdles for documenting income without the DRT affect not only borrowers who are applying for IDR, but also borrowers who are already in IDR. They are required to update their income documentation every year, and borrowers who miss those annual deadlines can face unaffordable spikes in monthly payment amounts that increase their risk of delinquency and default, as well as interest capitalization that can add substantial costs. As mentioned in our earlier blog post, we urge loan servicers to give borrowers in IDR more time to submit their updated income documentation while the DRT is down.

* There are no publicly available data on how many electronic IDR applications were previously submitted between April and October (each borrower is on his or her own timeline), or how many borrowers specifically used the DRT.

This post was updated on 4/24/17 to reflect changes from the Department of Education.

The IRS Data Retrieval Tool (DRT) allows students to automatically transfer their tax information into the online FAFSA or application for income-driven repayment (IDR) plans, instead of having to manually enter detailed tax return information. Millions of students each year rely on this streamlined online process to apply for federal student financial aid and to keep student loan payments affordable. Unfortunately, the DRT was abruptly taken down several weeks ago due to security concerns.

This week, a bipartisan group of 43 lawmakers from the House and Senate wrote a joint letter expressing concern about the DRT outage and recommending that the Department of Education and IRS take specific actions to improve communications and reduce the impact on students affected by the outage. Earlier this month, we joined a similar letter with national associations of financial aid professionals, college admissions counselors, and college access professionals.

Just today, theDepartment of Education announced that the DRT will be offline until the start of the next FAFSA season, which is expected to be October 1, 2017. This extended outage has very troubling implications for students applying for aid and borrowers trying to manage their student debt. The Department must take immediate steps to better communicate with and help students apply for the financial aid they need to get to and through college, as well as help borrowers access affordable loan payments that can keep them out of default. The Department should quickly move to:

Improve online communications about the DRT outage on all relevant federal websites and social media accounts, and engage in direct outreach to borrowers. Those communications should make clear that the DRT is currently down and provide specific guidance on what students, families, and borrowers should do in the meantime.

For example, prominent notices and guidance should be posted on:

The FAFSA homepage: As shown below, the FAFSA homepage includes an outage notice in the announcements, but it is not immediately clear what the outage means for students and users must scroll down for any guidance.

StudentAid.gov: On StudentAid.gov, the outage notice is one of several rotating items in the announcements bar at the bottom of the page, which can be easily missed.

StudentLoans.gov: There is currently no notice or announcement about the DRT outage on StudentLoans.gov, where borrowers go to apply for IDR plans and annually update their information to keep their payments tied to income.

The IDR application itself. There is currently no mention of the DRT outage on the online IDR application on StudentLoans.gov. As shown below, there are instructions within the application for how to proceed without the DRT, but borrowers may still start the form thinking that they can use the DRT, as they may have in previous years. Without the DRT, those borrowers cannot complete the application process online, but will have to print out the pre-filled application and mail it to their loan servicer, along with their paper tax return. (Update: The Department of Education has added a notice about the DRT outage to the IDR application.)

The Department’s Facebook and Twitter pages: Although it’s helpful that DRT outage notices are “pinned” at the top of both pages, the Department should regularly post those announcements so the public will see them in their feeds.

Additionally, the Department should directly email all borrowers in IDR plans who are approaching their annual deadlines to update their income information, informing them about the outage, telling them what they’ll need to do, and encouraging them to submit their paperwork early, since it may take loan servicers extra time to process their documentation without the DRT.

If students’ likelihood of being selected for verification is based on their use of the DRT, the Department should revise its verification selection criteria to prevent increases in the number of students who have to go through that complex extra process.

For FAFSA applicants selected for verification, the Department should allow signed copies of tax returns to satisfy documentation requirements. Students and parents used to be able to use the DRT for this, and the process of requesting an official tax transcript can be very burdensome (as documented by the National College Access Network). (Update: The Department of Education announced on 04/24/17 that it is making this change.)

The Department should adjust its criteria for requiring colleges to resolve conflicting information between the 2016-17 and 2017-18 FAFSAs, which are both based on income during calendar year 2015. This will help ensure that students get the aid they need and avoid disruptions in the middle of the year.

The Department should urge loan servicers to give borrowers in IDR more time to turn in their updated income documentation. Borrowers who miss their annual deadlines can face unaffordable spikes in monthly payment amounts that increase their risk of delinquency and default, as well as result in interest capitalization that can add substantial costs. Under current regulations, loan servicers have some flexibility in setting their deadlines; instead of setting deadlines 35 days before the end of the borrower’s annual payment period, they can set them closer to the end of the payment period. As long as borrowers submit documentation before their servicer’s deadline, they are not penalized, even if their paperwork is not fully processed before their next payment period starts.

The Department should ensure that its loan servicers and Federal Student Aid Call Center employees are well-equipped to help students, families, and borrowers navigate financial aid processes in the absence of the DRT

It is also crucial that while the Department and IRS work together to restore access to the DRT as soon as possible, they prioritize finding a way to maintain the security of the tool without creating barriers to access. We urge them to avoid requiring complicated financial or personal information that the low-income students who rely on the tool are unlikely to be able to provide. ​

Last week the Government Accountability Office (GAO) released a report highlighting weaknesses in the Department of Education’s budget estimates for income-driven repayment (IDR) plans for federal student loans. The Department agrees with and is already working to implement many of the GAO’s recommended changes to its methodology, some of which will increase estimated costs, while others will decrease them.

Meanwhile, most of themediacoverage of the report has focused on GAO’s projection that $108 billion of loan principal will end up being forgiven under IDR and Public Service Loan Forgiveness (PSLF) for loans taken out between 1995 and 2017. However, this does not mean those loans will cost taxpayers $108 billion. The amount of debt forgiven is only one part of the equation to determine the net cost of IDR plans to the federal government. A borrower can receive forgiveness in an IDR plan and still pay more in total than she would have under a different repayment plan.

Consider a borrower with $40,000 in federal loans and $40,000 in adjusted gross income (AGI) in her first year out of school. She would pay almost $8,000 more in total in the Pay As You Earn (PAYE) plan than in a 10-year fixed repayment plan ($57,000 versus $49,000), even though she would receive nearly $8,000 in forgiveness under PAYE.* The GAO recognizes this fact in their report, agreeing that “it is possible for the government still to generate income on loans with principal forgiven, particularly if borrower interest payments exceed forgiveness amounts.” (p. 50).

Ultimately, the cost of the federal student loan program is determined by comparing how much the government lends with the amount that borrowers pay back and the cost of administering the program. Doing this, analysis of CBO data reveals the government is actually making money from the federal student loan programs. In fact, CBO estimates savings of $81 billion from federal student loans over the next 10 years alone, even after accounting for increased enrollment in IDR plans.

Access to affordable, income-driven payments and a light at the end of the tunnel are essential for borrowers in an era of rising college costs and student debt. The GAO reported last year that 83% of borrowers in PAYE earned $20,000 or less in annual income, and recommended that the Department increase outreach to help more struggling borrowers learn about and enroll in IDR plans. IDR provides real relief for borrowers and helps them stay on top of their payments. Data show that borrowers in IDR are less likely to default or become delinquent than borrowers in standard plans.

Nonetheless, while IDR helps ensure that federal student loan payments are affordable and helps prevent default, it neither reduces college costs nor ensures that students and taxpayers are getting value for their investment in college. More needs to be done to strengthen college accountability and reduce student debt. For example, students need better information on program costs and outcomes, and the gainful employment rule needs to be enforced to ensure taxpayers are not subsidizing career education programs that consistently leave students with debts they are unable to repay. You can read more about our national policy agenda to reduce the burden of student debt here.

* Note: these calculations assume that the borrower is single, her AGI increases 4% a year, and the average interest rate on her loans is 6.8%. Total amounts paid and forgiven are adjusted for inflation.

Headlines have raised concerns about the costs of providing borrowers with affordable monthly payments tied to their income, and more recently, concerns about the cost of providing relief to students defrauded by Corinthian and other predatory colleges. However, analysis of Congressional Budget Office estimates released last month reveal that CBO is projecting that the federal government will make $81 billion in profit over the next 10 years from student loans even after accounting for the costs associated with income-driven repayment programs.[1] That’s, on average, nearly $8 billion per year.

With the federal student loan program projected to generate billions in profits, the government should swiftly discharge the debts of defrauded students, many of whom are currently struggling to repay loans from schools that left them worse off than before they enrolled. Both the borrowers and taxpayers will be better off when these borrowers are able to move on to quality educational programs and productive work.

Going forward, our proposal for one simple, affordable undergraduate loan includes an interest rate calculation that better reflects the government’s cost of borrowing and administering the loan program than the current formula (in place since 2013), which should reduce the likelihood that student loans generate consistently large profits for the government. We also propose streamlining the multiple income-driven repayment plans into one improved plan to keep payments affordable by capping payments at 10% of discretionary income and forgiving any remaining debt after 20 years, as proposed in the AFFORD Act introduced by Senator Jeff Merkley. However, when student loans do generate exceptionally large profits for the government, as is true today, we urge Congress and the Administration to use those funds to lower the cost of college for low-income students, rather than allow them to disappear into the federal budget.

[1] Calculations by TICAS and CBPP using data from the Congressional Budget Office (CBO), August 2016 baseline. Figures represent projected budget authority (BA) between 2017-2026, including $1 billion in lower expected costs due to sequestration. Figures for the total student loan program include the Direct Loan program, FFEL program, and administrative costs.

“We congratulate Amazon for deciding to stop promoting Wells Fargo’s costly private education loans. Private loans are one of the riskiest ways to pay for college, with none of the flexible repayment options and consumer protections that come with federal student loans. And Wells Fargo’s rates are among the highest at more than triple the undergraduate federal student loan interest rate of 3.76%. Undergraduate students under age 24 can borrow up to $31,000 in federal student loans, regardless of their income, and more if they’re older. Students should consider other schools if a school requires them to take out a private loan.”

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For more information on the differences between federal student loans and private loans see:

TICAS Statement on Wells Fargo/Amazon Deal to Dupe Students into Taking Private Loans

“This is the kind of misleading private loan marketing that was rampant before the financial crisis. It is a cynical attempt to dupe current students who are eligible for federal students loans with a record low 3.76% fixed interest rate into taking out costly private loans with interest rates currently as high as 13.74%. Amazon and Wells Fargo are trumpeting a 0.5% discount while burying the sky-high rates on these private loans and without noting that they lack the consumer protections and flexible repayment options that come with federal student loans. Also buried in the fine print is a note saying, 'Wells Fargo reserves the right to modify or discontinue interest rate discount program(s) for future loans or to discontinue loan programs at any time without notice.' Private loans are one of the riskiest ways to finance a college education. Like credit cards, they have the highest rates for those who can least afford them, but they are much more difficult to discharge in bankruptcy than credit cards and other consumer debts.”

Starting today, all borrowers with federal Direct student loans have access to a new repayment plan with monthly payments limited to 10% of your discretionary income. You can enroll regardless of when you borrowed. If you’re having trouble affording your monthly payments – or just want the assurance of payments based on your income – check out the Revised Pay As You Earn (REPAYE) plan and see if it’s right for you.

REPAYE and other “income-driven” plans can help keep monthly payments manageable, but may not be the best fit for everyone. Depending on how your income changes over time, you may pay more in total than you would under some other repayment plans, such as the 10-year standard plan.

Here is some key information for borrowers considering REPAYE:

How much will I pay each month? Your monthly payment will be 10% of your “discretionary income” (that’s your income minus150% of the poverty level for your family size). If your income is very low, payments can be as little as $0 until your income rises. To see what your payment would be in REPAYE and other plans, you can use the U.S. Department of Education’s easy online Repayment Estimator.

How long will I be making payments? Up to 20 years if you borrowed only for undergraduate education, or up to 25 years if you took out any federal loans for graduate school. If you reach the time limit and have not yet fully repaid the loan, the remaining balance will be forgiven (but under current IRS rules, it will be treated as taxable income). If you work full-time for the government or a nonprofit organization, you may be eligible to have your loans forgiven after 10 years of payments, tax-free. Find out more about Public Service Loan Forgiveness here.

Which types of loans are eligible? REPAYE is available for all federal Direct student loans that are not in default. If you have other types of federal loans (such as FFEL* or Perkins Loans), you can consolidate them into a Direct Consolidation Loan, which would then be eligible for REPAYE. Click here and here for information about the pros and cons of consolidating. Neither Parent PLUS loans nor consolidation loans that include Parent PLUS loans are eligible for REPAYE.**

How do I sign up? Apply online at StudentLoans.gov (look for the “Income-Driven Repayment Plan Request”), where you may be able to electronically transfer your tax information into the application form. Alternatively, you can request a paper application from your loan servicer. No matter how you apply, you can check a box asking for the plan with the lowest initial payment you qualify for. These plans are always available for free – you never have to pay a fee to enroll.

What if I am already in an income-driven repayment plan? You can change federal loan repayment plans at any time. If you’re already in Income-Based Repayment (IBR) or Income-Contingent Repayment (ICR), switching into REPAYE may lower your monthly payments and shorten the total time you have to repay. However, if you switch plans, any unpaid interest will capitalize (i.e., be added to your loan principal), causing interest to accrue on a higher loan balance. Also, if you have to consolidate your FFEL loans to make them eligible for REPAYE, any IBR payments you made before consolidating will not count toward your maximum repayment period in REPAYE.

For a high-level view of how REPAYE compares to the four other income-driven plans, we created a summary chart. To estimate your monthly payments and eligibility for REPAYE and other plans, visit the Department of Education’s online Repayment Estimator. For more detail about how REPAYE is different from other income-driven plans, see the Department’s blog post. You can find out more about all the income-driven plans at the Department’s website and our website for borrowers, IBRinfo.org.

What is next for income-driven repayment? While REPAYE is good news for many borrowers, it is confusing to have five different income-driven plans for federal student loans. There is broad and bipartisan support for Congress to streamline them into one improved income-driven plan. REPAYE is a good starting point for developing that new plan, but there are still important ways to improve it, including limiting payments to 20 years for all borrowers, as we and thousands of others have urged, and eliminating the taxation of forgiven debt.

* Most federal loans issued before July 1, 2010 were made through the Federal Family Education Loan (FFEL) program. If you’re not sure which type of federal loans you have, log in and check your record on StudentAid.gov. If you don’t want to consolidate your FFEL loans into a Direct Consolidation Loan, you may be able to enroll in a different plan called Income-Based Repayment (IBR). However, your monthly payments may be higher and you may end up paying for a longer period of time than you would under REPAYE.

** The only income-driven plan available for Parent PLUS loans is the Income-Contingent Repayment (ICR) plan, and the Parent PLUS loan must first be consolidated into a Direct Consolidation Loan to become eligible for ICR. For more information about ICR, click here.

Many low-income students who get enough aid to cover their tuition still struggle to pay for other basic college costs, including textbooks, transportation, room and board. These make up most of the cost of college for students at public four-year and community colleges. That’s why free tuition alone won’t solve the college affordability problem. The America’s College Promise Act introduced yesterday recognizes this by adding something with the potential to be far more transformative: a "maintenance of effort" provision aimed at making states hold up their end of the bargain when it comes to college funding.

States are critical players in keeping college affordable, but they have also been complicit in the rise of tuition and student loan debt by letting higher education get squeezed out of state budgets. The decline in per-student state funding for higher education has been welldocumented, as has the resulting impact on public college costs. Without federal intervention, higher education funding is likely to keep getting squeezed out, to the detriment of students, families and our economy. The legislation introduced yesterday includes such an intervention: it requires states to keep their funding levels up, in addition to eliminating tuition at community colleges, if they want to access new federal dollars. That’s why the state maintenance of effort requirement in the legislation is so important.

States can adopt proposals labeled “free college” that do little or nothing to make college more affordable for low- and moderate-income students. That’s what happened in Tennessee: it created a “last-dollar scholarship” that only helps students who don’t get enough from other grants to cover tuition. Oregon is poised to do something similar with $10 million, although some students will receive up to $1,000 for non-tuition expenses. Significantly, Oregon also increased need-based grant aid for low-income students by $27 million, which is critical because only one in five poor students who apply receives this state grant aid due to lack of funding.

We want states to invest in college affordability and debt-free college options, not in programs that may sound good but don’t make college more affordable for low- and moderate-income students. If we’re serious about increasing affordability and reducing debt, we need to help low-income students cover more of their costs. The America’s College Promise Act would free up community college students’ federal Pell Grants to cover non-tuition expenses by requiring states to waive tuition. This helps low-income students cover non-tuition expenses; using Pell Grants to declare tuition “free” for low-income students does not. After all, Pell Grant recipients, most of whom have family incomes under $40,000, are currently more than twice as likely to have to borrow and they graduate with more debt.

Making college affordable requires state investment in higher education. We commend the bill’s sponsors for tackling state disinvestment in public colleges—the primary driver of rising college costs and student debt in America.

Update: Details of the White House plan are becoming available and make clear it differs significantly from the Tennessee Promise and other “free community college” plans. In particular, the White House proposal is not a “last-dollar” scholarship. Instead, it provides additional federal funding to states that make key reforms, including not charging tuition or fees at community colleges. It is aimed squarely at stopping state disinvestment in public colleges, which is crucial to making college more affordable. Also, unlike the Tennessee Promise, low-income students could benefit. These are clear improvements on the plans discussed in our blog posted earlier today. Still, making tuition free for all students regardless of their income is a missed opportunity to focus resources on the students who need aid the most. Consider California community colleges, with the lowest tuition in the nation and waivers for low-income students. The result? Federal student aid application rates, even among low-income students, have been notoriously low, and part-time enrollment rates sky-high. "Free tuition" is not a panacea.

Many are predictingthat President Obama tomorrow will endorse Tennessee’s "free community college" plan. While the Tennessee Promise is well intentioned and more students than anticipated applied for it, many highereducationexperts have rightly criticized it and other "free community college" plans.

One of the major problems with the Tennessee plan (and others) is that the "promise" isn't actually much of a promise at all. That’s because the "free" moniker only relates to tuition charges – charges which comprise just one-fifth of the actual costs of going to community college. The other costs of college, including textbooks, transportation, and living expenses, are far more substantial – and far more likely to prove a barrier to student success. Yet they’re left out of the deal.

Further, the Tennessee plan (and others like it) is a "last-dollar" scholarship, meaning that it only helps students who don’t get enough from other grants to cover tuition. This is a critically important point because, given the relatively low income of community college students and the relatively low tuition charges at community colleges, it means that the students with the greatest need for financial aid will rarely benefit. Conversely, those with the least need are the most certain to benefit.

Free tuition plans are giant missed opportunities because they put resources where they are less needed when the need is so great in other areas. As shown in the table below, students in the lower income categories need far more financial support to bring college within reach. The vast majority of them (92% for the lowest income group) have "unmet need" even after accounting for available grants and what they can afford out-of-pocket. That’s true of just 9% of students in the highest income category: 91% of those students can already afford not just tuition, but their entire cost of attendance. Surely higher income students would appreciate additional resources, but do they need them? Not according to federal needs analysis, and the vast majority of these higher income students already enroll in college and are the most likely to graduate.

In addition to providing resources where they are not needed or needed less, these free-tuition plans are also ticking time-bombs. They signal that tuition is all that matters and flat-out ignore the other costs of attendance that determine whether students can get to campus, whether they’re focused on the material or how to pay for their next meal while in class, and whether they have a place to sleep at night.

Currently, many community college students get help paying for these other costs in addition to tuition. As shown above, the lowest income students’ average grant aid exceeds the amount of the tuition they’re charged by quite a bit: their total grant aid comes to about three times (328%) their tuition charge. On average, students with incomes below the median get grants that cover full tuition, with some resources left to help pay non-tuition costs, including fees, books, transportation, food and housing; students with incomes above the median get grants that cover, on average, about one-third of tuition.

If we prioritize covering tuition costs, treating the other costs of attendance as less important, how long until the grants for lower income students – grants which currently exceed tuition – are cut? This isn't a fantastical possibility. Limiting certain students’ Pell eligibility to tuition costs was an idea included in a federal appropriations bill not too long ago.

If resources were unlimited, there would be more merit to free tuition arguments. But resources are in fact so limited that the vast majority of low-income students – the students for whom financial aid will make the difference – aren't getting what they need. Free tuition proposals are politically popular, but regressive and inefficient. They are a lot like higher education tax benefits, where there is broad and bipartisan agreement that much better targeting is needed.

Free tuition proposals don’t just fail to move us forward: they’re a step in the wrong direction. We should absolutely do more to encourage students to pursue higher education and make them aware of financial aid, but this is not the way to do it.

ECMC has no experience running a college, let alone one of this scale, and is instead known for ruthless and abusive student loan operations. The agreement provides virtually no relief to the Corinthian students who enrolled and took on debt based on false claims. And with so many other colleges offering lower priced, higher quality career education programs, it’s unclear why this agreement is in the interests of either students or taxpayers.